NPV Versus Internal Rate of Return Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Clearlook Goodview Annual $720,000 $900,000 revenues Annual operating 445,000 655,000 costs System 900,000 investment 800,000 Project life 5 years Assume that the cost of capital for the company is 8 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. 5 years Required: 1. Calculate the NPV for the Clearlook System. $ 2. Calculate the NPV for the Goodview System. $ Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project. Round the discount factor to three decimal places. Round the IRR to the nearest whole percentage value (for example, 10.6% rounds to 11% and should be entered as "11" in the answer box.) Discount factor IRR Clearlook: % Goodview: % Why IRR is not suitable for choosing among these mutually exclusive investments. NPV Versus Internal Rate of Return Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Clearlook Goodview Annual $720,000 $900,000 revenues Annual operating 445,000 655,000 costs System 900,000 investment 800,000 Project life 5 years Assume that the cost of capital for the company is 8 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. 5 years Required: 1. Calculate the NPV for the Clearlook System. $ 2. Calculate the NPV for the Goodview System. $ Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project. Round the discount factor to three decimal places. Round the IRR to the nearest whole percentage value (for example, 10.6% rounds to 11% and should be entered as "11" in the answer box.) Discount factor IRR Clearlook: % Goodview: % Why IRR is not suitable for choosing among these mutually exclusive investments